Court Documents Show "Hoboken University Hospital lawyer resigned because he was afraid city was committing fraud"

Court Documents Show "Hoboken University Hospital lawyer resigned because he was afraid city was committing fraud"

Wednesday, September 14, 2011 Ed Mecka - edmecka.com

The Star Ledger reported that "the attorney for Hoboken University Hospital says he resigned in July because he feared the city was committing fraud by engineering the bankruptcy of its hospital."

"During the period of retention, which ended on July 15,2011, I was a firsthand witness to a pattern of conduct by HMHA members to intimidate, threaten, control, abuse, and attempt to force the CEO of HHI and members of the HHI Board to take actions adverse to its charter and otherwise to violate the laws of the State of New Jersey."

In court documents filed September 13, 2011 by Joseph J. DiPasquale of TRENK, DIPASQUALE, WEBSTER, DELLA FERA & SODONO, P.C., Attorneys for Hudson Healthcare, Inc., Debtor, claim "the Creditors' Committee and Donald Scarinci, Esq. concede that they met on August 25, 2011 at Scarinci & Hollenbeck's office without any notice to the Debtor and for the sole purpose of obtaining information concerning Scarinci's former client, the Debtor. Scarinci & Hollenbeck, was the general counsel for the hospital and its board from 2009 until July 16, about two weeks before the facility filed for bankruptcy.

In a September 3, 2011 email, Scarinci advises DiPasquale

"Since I was the one who first made contact with Andy Aaronson advising him that I was served with a subpoena, I had assumed that he would contact you and that your office would be offering helpful advise and assistance. I am surprised to read your threatening letter and cursory restatement of the law on the attorney client privilege.

I have made it very clear that I will not participate in the fraud that I believe your team of lawyers is attempting to perpetuate in the bankruptcy court. As everyone knows, I resigned from HHI precisely because I could not and would not be a part of any of this. I am not concerned about my legal fees because they will eventually be paid in full by the City of Hoboken, the ultimate indemnitor of HHI's debts.

However, I am concerned that the court knows that my law firm had no part in this insult to its intelligence and integrity. I am also deeply concerned that I am doing the right thing under the rules of attorney ethics and remain consistent with my own conscience. As I wrongly assumed you knew, since we are not strangers to each other, I am unaffected by threats, intimidation or promises of employment. Your "Hoboken Revolt" clients never figured that out and I've lived through over a year of this nonsense.

Perhaps by Tuesday, after you have had some time to yourself, your can conduct yourself in a more collegial manner and we can try this again. I am not your adversary. My suggestion is that you work out a mechanism to assert your claims of privilege to any document that my office provides and that if you and Mr .. Sherman do not agree then your procedure can involve in-camera review by the court or the court's designee. I will consult with attorneys in my office once they review the scope of the subpoena and someone from here will be in touch with Mr .. Sherman with a production schedule."

It is time for Federal and State Law Enforcement to investigate!

Here is the Star ledger report;

Hoboken University Hospital lawyer resigned because he was afraid city was committing fraud,

HOBOKEN — The attorney for Hoboken University Hospital says he resigned in July because he feared the city was committing fraud by engineering the bankruptcy of its hospital, court documents show.

Donald Scarinci, a partner in the influential law firm of Scarinci & Hollenbeck, was the general counsel for the hospital and its board from 2009 until July 16, about two weeks before the facility filed for bankruptcy.

In court papers, Scarinci says the city-backed authority created to oversee the hospital withheld millions in contractual payments to help make it appear the facility was in duress and push it into bankruptcy. The authority wants to sell the hospital to private investors who own the for-profit Bayonne Medical Center.

"I was the first hand witness to a pattern of conduct by the Hoboken Municipal Hospital Authority board members to intimidate, threaten, control, abuse and attempt to force the CEO of [the hospital] and members of the board to take actions adverse to its charter and otherwise violate the laws of the state of New Jersey," Scarinci said in a document filed Tuesday. Reached Tuesday, Scarinci declined to elaborate.

The attorney for the city’s hospital authority, Ken Rosen, of Lowenstein Sandler, said he would not "respond to hysterical allegations that have no basis in fact."

"We are focused on saving jobs at the hospital and ensuring it remains open," said Rosen. "The authority was incredibly diligent, hard working and searched for the best deal for the city of Hoboken and its taxpayers."

Doug Petkus, a spokesman for the authority, said, "The authority believes the allegations by Mr. Scarinci in his motion to the court are unfounded and false."

Scarinci claims the authority wielded its influence against hospital board members who questioned the failed payments and opposed the bankruptcy, including the hospital’s former CEO, who got a $600,000 severance package when he resigned two weeks before the bankruptcy filing. The hospital’s board members also resigned and were replaced by members picked by the authority, halting a pending legal challenge to the withheld payments, Scarinci said. He claims the authority granted departing members legal protection in exchange for their silence.

The goal, Scarinci says, was to ensure the hospital was sold to the investors, who are waiting for the state to approve a transfer of its license and a bankruptcy judge to rule on key motions considered pivotal to the $65 million sale.

The hospital owes creditors, including union pension funds, $34.6 million in unpaid bills and has asked a bankruptcy judge to approve a settlement that would give them $5 million, from the sale. Scarinci & Hollenbeck are among the creditors.

Scarinci’s accusations are in emails and motions filed in the bankruptcy case in response to questions by Lowenstein Sandler about whether he violated attorney ethics by meeting with creditors’ attorneys last month to talk about his ex-client.

In a Sept. 3 email to Lowenstein Sandler about the meeting, Scarinci responded, "I have made it very clear that I will not participate in the fraud that I believe your team of lawyers is attempting to perpetuate in the bankruptcy court. As everyone knows, I resigned from [the hospital] precisely because I could not and would not be part of any of this."

A federal judge yesterday denied Lowenstein Sandler’s motion to force the creditor’s law firm, Sills, Cummis and Gross, to turn over the notes from the meeting.

Resource Box

DECLARATION OF DONALD SCARINCI IN RESPONSE TO APPLICATION BY DEBTOR HUDSON HEAL THCARE, INC. TO COMPEL COMPLIANCE BY THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS WITH THE STAY IMPOSED BY D.N.J. LBR2004-l(D), etc.

RESPONSE:

10. In or about September 2009, Scarinci Hollenbeck was retained to represent Hudson Healthcare Inc., a private non-profit New Jersey corporation formed for the specific purpose of operating the Hoboken University Medical Center hospital (the "Hospital") on behalf of the Hoboken Municipal Hospital Authority ("HMHA"). HMHA is a public agency and body politic of the City of Hoboken. The scope of the retention was for general counsel and litigation purposes.

11. HMHA was formed by an act of the New Jersey legislature, N.J.S.A. 30:9-2B. The statute in relevant part requires the HMHA to operate through the auspices of a separate, private, non-profit manager which is designed to own nothing, have no assets, and have no right to receive income from the Hospital. This relationship is further memorialized in a written contract between HHI and the HMHA, known as the Master Manager and Operator Agreement, which became effective on February I, 2007. It is worthy to note that no other hospital in this State is operated pursuant to this statute.

12. There was therefore a critical relationship between HMHA and HHI with respect to the contractual and statutory obligations that HMHA has toward HHI concerning the payment of bills, collection of revenues, as well as HMHA's obligations to fund HHI in all respects. This is evidenced by the fact that- at the end of our tenure as HHI's counsel-- the HMHA advised us that they were reviewing our legal bills to HHI and had some questions.

13. During the period of retention, which ended on July 15,2011, I was a firsthand witness to a pattern of conduct by HMHA members to intimidate, threaten, control, abuse, and attempt to force the CEO of HHI and members of the HHI Board to take actions adverse to its charter and otherwise to violate the laws of the State of New Jersey.

14. As Your Honor is aware, this bankruptcy proceeding is on a fast track, purportedly to assist HMHA in completing its sale of the Hospital -- at the expense of the creditors and employees who made it possible for the Hospital to remain open for many years and to continue to service many low and moderate income people who avail themselves of the Hospital's services. Committee counsel had little time to learn the true nature of things, and they agreed to attend a meeting at our offices to gather background information regarding non-privileged items.

15. In such a rushed atmosphere, it would be easy for a newcomer to the matter to overlook the serious Constitutional implications in granting approval to such a bankruptcy. HHI was established as a zero income, zero asset shell entity designed solely to run the day to day workings of the hospital. All income generated by HHI went directly to the Authority, not to HHI. From the day it opened for business, by bankruptcy standards, it was insolvent and undercapitalized. The only source of income was the Authority. Could the New Jersey Legislature have intended to create a scheme whereby an Authority, a body politic and political subdivision of the State of New Jersey, finding itself awash in debt, and being denied the right to file Chapter 9 bankruptcy, effectively bifurcate itself, and cause only the operating managing entity to file bankruptcy? Framed this way, the Court can appreciate the great damage such an action would have on any private party's future dealings with any New Jersey State agency.

16. All attendees at the one and only meeting that we had with Committee counsel were cognizant of the attorney-client privilege, and no privileged information was exchanged.